PENSION CRISIS: Recent history of employer contributions

During the last three decades, the general trend in employer, or state, contributions to SERS and PSERS has been downward.

Employer contribution rates have been on the rise in recent years because of massive unfunded liabilities in the two retirement systems.

The liabilities grew primarily because of down investment markets in the beginning of the last decade and the global recession in 2008. Benefit enhancements for active and retired members in 2001 and 2002 and deferral techniques that changed the amortization schedule of gains and losses in 2003 also contributed (see "Brief history of PSERS and SERS," page 10).

SERS

The employer contribution rate was in the 18 percent range in the years 1981 to 1984. It fell through the years and hit zero in 2000 and 2001.

The rate went back up slightly during the last decade before reaching prescribed levels of 4 percent in 2006-07 through 2009-10.

The total employer cost is the actual contribution rate during the succeeding fiscal year. For instance, the rate of 11.5 percent for the Dec. 31, 2011, valuation is the employer contribution for the current fiscal year, according to a recent SERS actuarial valuation.

Act 120 of 2010 helped address an anticipated spike in pension costs in the current fiscal year by "smoothing" the increase over a longer period of time.

PSERS

Between 1986 and 1991, the employer contribution rate stayed around

19 and 20 percent before dropping off to less than 15 percent in 1992.

The rate plunged as far as 1.09 percent in 2002 before ticking up around

4 percent in the middle part of the last decade, according to a recent PSERS actuarial valuation.

The employer contribution rate was 6.46 percent in 2007 and 7.13 percent in 2008. It dipped again in 2009 and 2010. The rate was 8.65 percent this year. It will be 12.36 percent for the current fiscal year that ends June 30, 2013.

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Jason Scott

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